Palm Oil Futures Edge Higher as Market Balances Soft Demand and Supply Risks

Palm oil futures are stabilizing slightly above MYR 4,450/t, with a gently backwardated curve that points to cautious optimism but no clear bullish breakout. Softening import demand and Indonesia’s lower June reference price cap upside, while biodiesel mandates and potential weather risks limit downside.

The palm oil market enters June with relatively firm but range-bound pricing. Front MDEX contracts around MYR 4,470–4,535/t show only modest day-on-day changes and a mild backwardation into late 2026 and 2027, signalling a market that expects adequate but not burdensome supplies. Recent Indonesian export policy adjustments and a lower June CPO reference price highlight softer global demand, particularly from India, yet higher biodiesel blending in Malaysia, rising costs and structural energy-market support keep the complex underpinned. Inventories remain moderate and export flows mixed, leaving prices sensitive to any shift in weather or policy.

Prices & Curve Structure

MDEX crude palm oil futures as of 29 May 2026 show a tight range and light gains in nearby contracts:

• Jun 2026: 4,470 MYR/t (+0.18% d/d)
• Jul 2026: 4,503 MYR/t (−0.04% d/d)
• Aug 2026: 4,535 MYR/t (−0.04% d/d)
• Nov 2026: 4,620 MYR/t (+0.19% d/d)
• Jan 2027: 4,671 MYR/t (+0.36% d/d)

Further out, listed contracts for 2028–2029 cluster around 4,505 MYR/t with no volume, underlining limited forward liquidity and a market focused on near-term fundamentals.

(Conversion assumes roughly 1 EUR ≈ 5.2 MYR.)

Supply, Demand & Policy Drivers

On the demand side, Indonesia has just lowered its June 2026 CPO reference price to around USD 1,030/t, reflecting softer global buying interest and weaker demand from key importers such as India. At the same time, recent data show that India’s palm oil imports dropped sharply in April, even as Malaysian exports in March had surged year-on-year, underlining how volatile and price-sensitive buying remains.

Malaysia’s domestic picture is mixed. Official statistics indicate palm oil stocks at about 2.30 million tonnes in April, up 1.7% month-on-month, with exports down 14% versus March but still robust on a yearly basis. Analysts nonetheless highlight improving export interest in early May, helped by expectations of firmer demand from major buyers and by the roll-out of a higher biodiesel blending mandate (B15) from June, which should redirect part of output into energy use.

Policy is a key swing factor. Malaysia has recently raised its CPO reference price and corresponding export duty to 10%, while Indonesia has intensified state control and export management, including new export controls that have stirred market uncertainty. These moves may periodically tighten nearby availability and support regional benchmarks, but the latest Indonesian reference-price cut suggests authorities are also sensitive to downside price risks stemming from demand softness.

Fundamentals & Weather Outlook

Underlying fundamentals remain broadly balanced. After earlier weather disruptions in parts of Malaysia earlier this year, production has normalised and even improved in April, contributing to the modest stock build. Looking ahead, USDA and industry forecasts continue to see Malaysia on track to export up to around 16 million tonnes in 2026, although its share in global oils and fats trade is set to edge down over the longer term as Indonesia and alternative oils expand.

Weather risk is re‑emerging on the radar. Regional updates around Singapore and the broader Maritime Continent point to an increased likelihood that El Niño conditions will form from June onward, with expectations for drier and warmer weather into the Southwest Monsoon. While concrete yield impacts for palm oil in Malaysia and Indonesia are not yet visible, markets typically begin to price some risk premium when El Niño probabilities rise, especially against the backdrop of relatively tight competing vegetable oils and ongoing biodiesel demand.

Trading Outlook & Strategy

• Producers / Sellers: The current mild backwardation and flat nearby prices around 860–890 EUR/t offer opportunities for incremental hedging of Q3–Q4 2026 output, particularly if individual cost structures remain below current futures levels. Consider layering in hedges on rallies driven by weather headlines or policy shocks.
• Importers / Consumers: With Indonesia’s lower reference price and only moderate Malaysian stock growth, downside appears limited but not absent. Scale-in buying on dips towards the lower end of the MYR 4,300–4,400/t range could be prudent, while keeping flexibility via options ahead of clearer confirmation on El Niño impacts.
• Speculators / Funds: The balance between soft demand signals and structural biodiesel and energy support suggests a range-bound market in the near term. Strategies such as selling volatility or trading the range between roughly 4,300 and 4,700 MYR/t may be attractive, with tight risk management around key data releases (stocks, export surveys) and policy headlines.

3-Day Directional View (EUR-based)

• MDEX nearby (Jun–Aug 2026): Sideways to slightly firmer in EUR terms, with the curve anchored around 860–875 EUR/t as traders digest Indonesia’s new reference price and monitor early-June export data.
• Deferred 2026 (Nov 2026–Jan 2027): Mildly supported relative to spot near 890–900 EUR/t, reflecting policy and weather risk premia but limited fresh buying interest so far.
• Very long-dated (2028+): Illiquid and largely indicative; no strong directional signal beyond the current assumption of structurally firm but not extreme pricing.